Tuesday, August 29, 2017

Following an uneventful Jackson Hole meet, US Treasuries remained supported amid mild risk aversion, after the news reported that North Korea had launched a missile that flew over Japan on Monday. Meanwhile, wholesale inventories came better than expected at +0.4% mom, above consensus +0.3% mom but lower than +0.6% mom for the previous two months.

Malaysia: MYR government bonds moved in narrow ranges. Support particularly came from the foreign players, coupled with firmer MYR, as USD/MYR edging lower to 4.2677. WI for the 7-year GII was 3.98/96%, lower than 3.99/97% last Friday. Overall, MYR bonds are likely to be supported in the near term, alongside gains in UST, after the Jackson Hole meet turned out to be non-event while markets reacted with doubts in future Fed hike path. Key data to watch out for will be US NFP report this Friday.

Thailand: Thai sovereign yield curve bull-flattened, in line with UST movement. The 5-year tenors declined about 2-3bps. Foreign investors continued to decrease position in short-term and long-term Thai bonds (-Bt1.535 billion) while front-ends traded little changed from Friday as overall activities were light with 16% drop in outright trading value to Bt70.37 billion on Monday. We expect a significant FIF flows led by roll-over from month-end spot date (settlement in 2 business days) followed by new investment flows that will put pressure on forward swap points. Therefore, 6m-THBFIX and front-end IRS can be lower (1-year THBIRS last trade on Mon at 1.32%).

Indonesia: IndoGBs opened biddish but activities felt less as market was digesting Friday afternoon's SDBI auction, where BI set cutoff rate for 12m SDBI at 5.63%, (much lower compared to last auction at 6.02%). Buyers seem eager to bid for 3- to 7-year tenors, sending the curve to bull steepen. Some profit taking pressure was seen in the afternoon session but strong bids kept market well supported.